South Carolina Competitiveness Initiative Hospitality and Tourism Analysis
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1 South Carolina Competitiveness Initiative Hospitality and Tourism Analysis INNOVATION ECONOMIC PERFORMANCE BUSINESS ENVIRONMENT CLUSTERS COLLABORATION PRODUCTIVITY ECONOMIC COMPOSITION SPECIALIZATION STRATEGY Phase I Presentation Columbia, South Carolina Dec. 8, 2003 Copyright 2003 by Professor Michael E. Porter and Monitor Company Group, L.P. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise without their permission. This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion. 1 Copyright 2003 Professor Michael E. Porter and Monitor Company Group, L.P.
2 Agenda Overview of the South Carolina Competitiveness Initiative Conceptual Framework and Methodology Assessment of the South Carolina Economy Economic Performance and Innovation Output Economic Composition Clusters Impact on Economic Performance Business Environment Assessments of Selected Clusters Automotive Chemicals Textiles Tourism Implications and Recommendations 2 Copyright 2003 Professor Michael E. Porter and Monitor Company Group, L.P.
3 South Carolina Hospitality and Tourism Cluster Overview Performance: Modest sized cluster with slightly higher employment growth than the US average; Slightly lower average wages and wage growth Position: Diverse positioning, from very low-cost to high-end; Focus on relaxation such as golf and beach much like nearby competitors Strengths: Attractive natural assets (e.g., climate, golf, coastline); Historical and military sites Challenges: Relatively weak K-12 system; Limited supply of specially trained local workers; Limited collaboration among firms on product development; Numerous cluster councils, but fragmented efforts with little consensus on strategy 3 Copyright 2003 Professor Michael E. Porter and Monitor Company Group, L.P.
4 Hospitality and Tourism Cluster South Carolina s Relative Performance State 2001 Location Index* 2001 Employment Employment Growth 2001 Average Wage Average Wage Growth Establishments Growth Nevada , % $26, % 1.81% Hawaii , % $27, % 2.08% Vermont , % $14, % 1.62% Wyoming , % $15, % 3.54% Florida , % $20, % 2.87% Mississippi , % $19, % 4.23% Montana , % $13, % 4.63% District of Columbia , % $29, % 0.24% Arizona , % $18, % 4.07% Alaska , % $25, % 5.61% Louisiana , % $18, % 4.34% South Dakota , % $12, % 2.71% New Mexico , % $15, % 3.39% West Virginia , % $15, % 2.17% Colorado , % $19, % 3.62% South Carolina (Ranked 19 th ) South Carolina Out- Performs Percent of Top 15 Employing States , % $16, % 3.32% 0% 60% 60% 40% 47% 47% * Location Index, also known as Location Quotient, equals 1 when a state s share of cluster employment equals the state s share of total employment. A Location Index greater than 1 indicates that state has a disproportionate share of Hospitality and Tourism employment, relative to the state s total employment. Narrow cluster definition. Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School 4 Copyright 2003 Professor Michael E. Porter and Monitor Company Group, L.P.
5 Competitive Position in Tourism South Carolina vs. the United States Average Key Per Visitor* Metrics of South Carolina and United States Tourism Industry, South Carolina U.S Visitors per Tourism Employee Gross Tourism Product (in dollars) per Visitor 50 Capital Investment (in dollars) per Visitor Transaction Taxes** (in dollars) per Visitor * Visitor Trips exclude pass through visitors to make SC comparable to the U.S. ** Transaction Taxes using projected for SC 2001, actual U.S Source: SC PRT; TIA; WTTC United States Report, 2003; Monitor Analysis 5 Copyright 2003 Professor Michael E. Porter and Monitor Company Group, L.P.
6 Relatively high number of airports Active technical college system Attractive natural assets, including climate, golf courses, and coastline Unique military and American history assets Lack of hub airport means few direct flights to key markets and expensive fares Relatively weak K 12 and specialized advanced educational programs for locals Limited supply of local skilled workers Lack of interstate access to Myrtle Beach Underdeveloped port passenger terminal in Charleston Few specialized tourism research centers South Carolina Tourism Business Environment Findings from the Surveys and Interviews Note: Red bold letters illustrate key themes; Dotted boxes indicate potentially leverageable assets Source: Monitor Competitiveness Survey, Interviews, Monitor Analysis Intense local competition Few local headquarters of core operations Limited collaboration between firms on development of integrated product offerings Highly fragmented industry lacking major anchor organizations Context for Firm Strategy Frequent feedback from and Rivalry customers on product improvements Factor Conditions Demand Conditions Relatively small presence of Related and international visitors Supporting Lack of high-end Industries tourism consumers beyond Hilton Head and Charleston A number of specialized transportation-related sub-clusters Relatively low quality of suppliers Limited interaction on new product development Few support industries that capture a significant portion of the value chain (i.e., tour operators, reservation systems, large travel agencies) 6 Copyright 2003 Professor Michael E. Porter and Monitor Company Group, L.P.
7 South Carolina Tourism Business Environment Findings from the Surveys and Interviews (Cont.) Relatively good recent collaboration between public and private sectors Recent improvements in marketing and promotional efforts by the state Need for greater support for specialized education and training programs Lack of adequate market research Limited funds available for tourism promotion and perceived overall lack of support from the legislature Limited role in providing policy framework and catalyzing collaborative efforts Government Factor Factor Conditions Context for for Firm Firm Strategy and and Rivalry Rivalry Related and and Supporting Industries Demand Conditions Institutions for Collaboration Note: Red highlights indicate factors different from the state overall, or of particular significance to the cluster Source: South Carolina Competitiveness Survey, Monitor Interviews, Monitor Analysis Emergence of several regional organizations for and initiatives aiming to build networks Effective organizations for marketing key tourism destination areas Few statewide organizations working to upgrade the quality of all elements of the business environment Limited coordination between universities, government and companies Numerous regional cluster institutions yet limited focus on building partnerships 7 Copyright 2003 Professor Michael E. Porter and Monitor Company Group, L.P.
8 South Carolina s Hospitality and Tourism Cluster New Directions Visitors Identify attractive, high-potential segments Updated Strategy Create a differentiated position that provides the right destination for the right tourist segments by: Product Offering Identify attractive, high-potential assets High per capita tourism expenditures High conversion rate Cost-effective marketing and distribution channels Critical mass of visitors Adequate transportation infrastructure in place Improving visitor mix Packaging, cross-selling, and cross-promoting Broadening and upgrading of product offering Increasing conversion of pass-through / business visitors Increasing shoulder season occupancy Leveraging tourism to attract talent and businesses to SC Coastline and beach resorts Historic cities, towns, plantations, and military sites Golf courses State parks and forests Cultural attractions Family attractions Retail offering 8 Copyright 2003 Professor Michael E. Porter and Monitor Company Group, L.P.
9 South Carolina s Hospitality and Tourism Cluster Findings and Implications Strengths Natural endowments Attractive coastline Climate and quality of life Multiple historic / heritage assets Economic development organizations Effective state and regional marketing organizations Relatively effective public / private sector collaboration Workforce and education Strong technical colleges Select high school providing specialized H&T programs Challenges Tourism-oriented transportation infrastructure for tourism Few direct flights and expensive air fares Lack of interstate access to Myrtle Beach Underdeveloped passenger terminal in Port of Charleston Visitor mix Disproportionate concentration on drive leisure tourists from established domestic markets Limited segmentation efforts; lack of market research Cluster composition Few large firms that can act as anchor organizations Limited collaboration in integrated product offering Relative low presence of upstream and support firms Action Items (Preliminary) Create a differentiated position coupling an attractive coastline and rich historical assets Appeal to international and domestic fly-in visitors looking for unique US destinations Upgrade tourism-related educational system Promote industry / university / technical colleges collaboration to make SC a premiere H&T educational and research location Leverage technical colleges to develop training programs for local and rural workers Expand H&T vocational high-school training Develop state transportation infrastructure plan Attract low-cost carrier to state Upgrade passenger terminal in Charleston Speed-up construction of I-73 Entice cluster-specific organizations to Promote business development through collaborative efforts and data-driven plans Recruiting and expansion Targeted recruiting of tour operators, reservation systems, travel agencies Creation of statewide cluster organizations Focus on tourism services related research and technology companies 9 Copyright 2003 Professor Michael E. Porter and Monitor Company Group, L.P.
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